Hi
I really want to buy soon. Looking at a property that is sub-dividable with a view to keep existing
house and sell off the lots. All within 12 months.
We are in the process of doing our tax returns for the last 3 years (naughty I know) We are self-employed.
We do have a high cash flow business and some money doesnt hit our accounts. We are looking at combined
income 65K – 75K after all costs are taken out ON PAPER (in accounts etc). Our accountant said we can put some cash on top as well. Our dilemma is;
how big the tax bill will be compared to how much do we want to borrow to make money. How much should we declare?
I think we are going to need to borrow 500K at least. What level of income do we need combined to
borrow 500K? We can use equity hopefully in either the property we buy as it will probably only be valued as a single lot with sub-division potential.
Also, my partners credit reference is perfect however mine has had a couple of under $100 bills that are paid however I have a couple of years to go with it on my cra. Am I better putting the loan in my partners name only?
Also, would a commercial loan be easier to get? With interest paid at the end of the year plus outlay?
Thanks in advance:)Check whether the broker will give you the desired amount as a standard loan – why pay the penalty for commercial rates if you don't need to? As an alternative, go for some short-term finance – discuss with the bank the use of 180 day bank bills.
Are the bank bills generally easier to get than a loan, or about the same? Thanks for your help by the way, you are showing me options I would not have ever thought of:)
A couple of points to bear in mind:
1) With a commercial style loan you will not get more than 75-80% LVR on the sort of security you are looking at.
2) Depending on your other income and expenses you will struggling to show serviceability on $65K per anum.
3) Going lodoc / nodoc is an option if your accounts are not ready when you make the application.
4) With any form of adverse credit showing you can expect to pay a higher premium rate for any loan.
5) Putting the loan in your partners name (maybe the only solution given your potential CRAA) will put more strain on your serviceability.In
Richard Taylor | Australia's leading private lender
Hi Richard
what type of income should we have to have serviceabililty? We only want a 1-2 year term and ill explain
our proposal to the bank or broker. We are able to use one of my parents properties as equity as they want to help
us out. The tax declared is after all costs have been removed. We have HUGE costs in our business such as freight and purchasing stock so pre tax our actual incming and outgoing would be very high I think its 60-90K in a 3 month period.
Our tax returns should be back in about 3 weeks I am hoping. I tried to get a low doc loan around 2 years ago but they would not give us one with no tax returns. This is all very confusing for us.A lodoc loan is aimed specifically at your circumstances where your Tax returns are merely not available.
Obviously your Accountant is required to reflect a true and accurate tax summary of your business and whilst i understand you may receive a lot of cash payments this can be included in your income.
A family equity loan maybe available subject to your income (Unlikely you will obtain this under a lodoc or commercial style loan) however as long as they understand the implications of such a facility.
Richard Taylor | Australia's leading private lender
Ok,.so who do I speak to about all this? I do not want to deal with the banks direct but I really want the best chance to get a loan
our last broker realy did not try very hard.Shoot me an email and would be happy to assist you.
Richard Taylor | Australia's leading private lender
Thanks Chelsea just responded to your email.
Richard Taylor | Australia's leading private lender
I would suggest approximately 4 x Gross Annual Income for a rough serviceability guide subject to any other liabilities you may have.
Low Doc loans should be exactly that with no financials required. In most cases you are able to borrow up to 80% of a properties value under these type of loans at standard "Full Doc" interest rates.
I would be glad to help.Regards
There are a few things you need to consider here.
First thing first. If I am not mistaken, and you are in WA, then it is a legal requirement that the broker doing your finance is Licenced under WA legislation.
Second, if this is the same property as the one in your 'subdivision costs' post, then 14 lots is going to be a bit hard to sneak in as a residential security.
Thirdly, and I dont mean to rain on your parade, but most commercial funders (Even Bankwest) are not too interested in funding anything in WA got the time being, and probably for a while yet. You will probably have to go private money.
The best thing you can do is a brief fesibility, and get it to a Broker that can place it for you. If you dont have a fesibility and a very clear dollar figure you need in mind, you really don't have a project yet.
How much is the security worth – As is? No DA? With DA. How much do you need to get the works in place etc etc.
If you require further assistance, I can certainly assist you to get the info together.Best of luck.
Tim
With careful thought I have decided to go a dupex site to begin with, and build 2 townhouses or units.
I do not believe that Perth is going to go right down pricewise. I just dont think thats realistic. I think it will level
out and I am basing my selling price on just below market value. Thanks:)Tim
You are correct any Broker operating in WA needs to hold a State Credit License (which of course thankfully we do).
Chelsea is looking at a R40 block which can be strata titled into 4 lots in WA.
The loan would be done as a small lot development and i must disagree with you that most commercial funders are shying away from WA. We have recently completed a couple of decent sized loans for clients in Perth and had no issue with the particular lender.
Richard Taylor | Australia's leading private lender
MortgagePlus wrote:Thirdly, and I dont mean to rain on your parade, but most commercial funders (Even Bankwest) are not too interested in funding anything in WA got the time being, and probably for a while yet. You will probably have to go private money.This is simply not correct. Regional WA is certainly more difficult that it was previously, and construction funding policies have definately tightened up everywhere. But there is no issue with Perth if the application is strong.
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